19. The supply of a new drug is Q= 50 X P – 100. The demand for it is Q = 6,600

Question

19. The supply of a new drug is Q= 50 X P – 100. The demand for it is Q = 6,600 – 15 X P.
What is the market equilibrium price and quantity? (2 pts).

20. Two hospitals want to merge. The price elasticity of demand is -0.20, and each clinic has fixed costs of $100,000. One clinic has a volume of 9,200, marginal costs of $70, and a market share of 3 percent. The other clinic has a volume of 15,800, marginal costs of $80, and a market share of 6 percent. The merged firm would have a volume of 18,000, fixed costs of $80,000, marginal costs of $60, and a market share of 6 percent. (5 pts)

What are the total costs, revenues, and profits for each clinic and the merged firm? How does the merger affect markups and profits?   

Explanation / Answer

Answer19: SS = 50P+100

DD = 6600-15P

Equilibrium price i sdetermined where DD =SS

6600-15P = 50P+100

65P = 6500

P = $100

Q = 6600-1500 = 5100 units

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